March 1, 2021
Clickongh

Covid-19 related spending in 2021 to exceed GH¢4.74bn

GH¢4.74 billion has been earmarked as Covid-19 related spending for the year by the government.

However, the resurgence in Ghana’s coronavirus cases could exert upward pressure on public spending above the GH¢4.74 billion planned for covid-19-related expenditure in 2021.

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According to Databank Research, the government estimates total expenditure including arrears payment for 2021 at GH¢103.51 billion.

However, total revenue including grants is expected to grow by 24% year-on-year to GH¢66.54 billion for 2021.

This will translate into an overall deficit of GH¢36.97 billion (8.3% of GDP). But this might seem ambitious because the nation might struggle to achieve the total revenue of GH¢66.54 billion

“We forecast total expenditure at GH¢104.30 billion, translating into a forecast overall budget deficit of GH¢38.01 billion (8.6% of GDP)”, Databank Research disclosed in its 2021 Economic Outlook Report.

“The potential drag on economic activity below Government’s growth forecast for 2021 could also weigh on revenue for the year. The combination of these unanticipated revenue and expenditure shocks could push the overall budget deficit towards the 9.1% upper end of our forecast range”, it further said.

Financing the 2021 deficit

The Treasury will target a net foreign financing of GH¢45.73 billion, which includes GH¢31.3 billion as sovereign debt issuance and GH¢13.678 billion as external debt amortization.

On the domestic front, the Treasury will target a net domestic financing of GH¢32.35 billion. This will include borrowing GH¢17.47 billion from commercial banks, GH¢14.19 billion from Non-banks (including pensions and other institutional funds) and GH¢694.38 million from the Petroleum Holding Funds.

“However, we observed an indication to revert to zero-financing from the Central Bank in 2021. We however do not anticipate significant upside implications for domestic yields in 2021 as we expect a relatively stable GHS amidst the Treasury’s yield compression strategy.”

Source: Ghana News

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